NorthWest Indiana Bancorp Announces Earnings for the Three Months
Ended March 31, 2019

April 23, 2019 04:30 PM Eastern Daylight Time

MUNSTER, Ind.--(BUSINESS WIRE)--NorthWest Indiana Bancorp (the “Bancorp” or “NWIN”), the holding company
for Peoples Bank SB (the “Bank”), reported net income of $2.2 million,
or $0.66 per share, for the first three months of 2019. In connection
with the successful acquisition of AJS Bancorp, Inc., (“AJSB”), which
closed on January 24, 2019, the Bancorp incurred one-time expenses of
approximately $2.1 million, as expansion into the Chicagoland market
continued. Net income for the three months ended March 31, 2019,
decreased by $339 thousand (13.2%), from the three months ended March
31, 2018, primarily due to one-time expenses associated with the
acquisition of AJSB. In addition to the acquisition of AJSB, on July 26,
2018, the Bancorp completed its acquisition of First Personal Financial
Corp., (“First Personal”). For the first three months of 2019, the
return on average assets (ROA) was 0.72% and the return on average
equity (ROE) was 7.59%. At March 31, 2019, the Bancorp’s assets totaled
$1.3 billion, an increase of $172.2 million (15.7%), from $1.1 billion
at December 31, 2018.

Excluding the one-time AJSB acquisition costs, the Bancorp’s net income,
as adjusted, was $4.1 million, or $1.21 per share, for the first three
months of 2019. Excluding these same one-time AJSB acquisition costs,
the Bancorp’s ROA, as adjusted, was 1.32% and its ROE, as adjusted, was
13.84% for the first quarter of 2019. See Table 1 below for a
reconciliation of these non-GAAP figures to the Bancorp’s GAAP figures.

“The first quarter of 2019 was a solid start to the year, driven by both
organic and inorganic growth. We successfully closed our merger with AJS
Bancorp, Inc. and its wholly owned subsidiary A.J. Smith Federal Saving
Bank, and also saw the results of strong loan demand in our core markets
of Northwest Indiana and South Suburban Chicagoland,” said Benjamin
Bochnowski, president and chief executive officer. “We have grown our
balance sheet significantly over the past two years, and the company is
seeing the benefits of economies of scale. When you adjust earnings for
acquisition expenses, the Bank shows very strong earnings. This is the
result of years of planning and execution by a skilled and dedicated
team.”

“Integration of operations with AJSB is underway, and is expected to be
completed by the end of May 2019. The majority of acquisition-related
expenses were recognized in Q1 2019, and remaining expenses should be
recognized by the end of Q2 2019. We have gained significant experience
as an acquirer, and we have used that expertise to successfully execute
our strategy. Our market area now reaches 65 miles end-to-end, and our
growth allows us to deliver better banking to our customers,” continued
Bochnowski.

“Acquisition expenses for the AJSB merger had a significant impact on
the Bancorp’s first quarter net income. For the first three months of
2019, approximately $2.1 million in acquisition related expenses have
been incurred. Excluding the acquisition related expenses, the Bancorp’s
net income for the three months ended March 31, 2019, increased by 58.3%
compared to the same period in 2018,” said Robert Lowry, chief financial
officer. See Table 1 below for a reconciliation of these non-GAAP
figures to the Bancorp’s GAAP net income.

“As a result of the management team’s recent strategic growth
initiatives, the Bancorp’s primary earnings driver, net interest income,
has increased by $2.8 million, or 35.3% for the first three months of
2019. In addition, at March 31, 2019, the Bancorp’s tier 1 capital to
adjusted average assets was 8.5% after the AJSB merger. The Bancorp is
well positioned for continued growth,” added Lowry.

Net Interest Income

Net interest income was $10.6 million, an increase of $2.8 million
(35.3%), compared to $7.8 million for the quarter ended March 31, 2018.
The Bancorp’s net interest margin on a tax-adjusted basis was 3.93% for
the three months ended March 31, 2019, compared to 3.80% for the three
months ended March 31, 2018. The increased net interest income was
primarily the result of the acquisitions of AJSB and First Personal, as
well as organic loan growth.

Noninterest Income

Noninterest income from banking activities totaled $2.6 million for the
three months ended March 31, 2019, compared to $2.4 million for the
three months ended March 31, 2018, an increase of $121 thousand or 4.9%.
The increase in noninterest income is the result of the Bancorp’s
continued focus on competitively pricing its fees and service charges as
well as its increasing mortgage banking and wealth management
activities. The increase in the cash value of bank owned life insurance
income was primarily the result of the acquisitions of AJSB and First
Personal. The increase in other noninterest income was primarily the
result of gains made on the sale of fixed assets.

Noninterest Expense

Noninterest expense totaled $10.3 million for the three months ended
March 31, 2019, compared to $7.0 million for the three months ended
March 31, 2018, an increase of $3.3 million or 47.7%. For the three
months ended March 31, 2019, one-time expenses of $2.1 million have been
incurred in connection with the acquisition of AJSB. For the three
months ended March 31, 2019, the increase in compensation and benefits
is primarily the result of increased compensation due to the acquisition
of AJSB and First Personal. Additional increases to compensation and
benefits can be attributed to management’s continued focus on talent
management and retention. The increase in occupancy and equipment is
primarily related to the First Personal and AJSB acquisitions and
related assets. The increase in data processing expense is primarily the
result of data conversion expenses related to the acquisition of AJSB.
The remainder of the increase in data processing is due to increased
system utilization. The increase in marketing expense is a result of the
acquisition of AJSB as well as the Bancorp’s regular marketing
initiatives. The increase in other operating expenses is primarily
related to the acquisition of AJSB and accounts for approximately $1.8
million of the increase for the year ended March 31, 2019.

The Bancorp’s efficiency ratio was 78.1% for the three months ended
March 31, 2019, compared to 67.8% for the nine three months ended March
31, 2018. Excluding the one-time acquisition expenses associated with
AJSB, the efficiency ratio would have decreased to 62.1% for the three
months ended March 31, 2019. See Table 1 below for a reconciliation of
the non-GAAP figure to the Bancorp’s GAAP efficiency ratio. The
efficiency ratio is determined by dividing total noninterest expense by
the sum of net interest income and total noninterest income for the
period.

Lending

The Bancorp’s loan portfolio totaled $865.0 million at March 31, 2019,
compared to $764.4 million at December 31, 2018, an increase of $100.6
million or 13.2%. The increase is the result of the acquisitions of AJSB
and First Personal, as well as organic loan portfolio growth. During the
first three months of 2019, the Bancorp originated $29.7 million in new
commercial notes. During the three months ended March 31, 2019, the
Bancorp originated $9.8 million in new fixed rate mortgage loans for
sale, compared to $8.3 million during the three months ended March 31,
2018. The loan portfolio represents 74.8% of earning assets and is
comprised of 56.1% commercial related credits.

Investing

The Bancorp’s securities portfolio totaled $251.3 million at March 31,
2019, compared to $241.8 million at December 31, 2018, an increase of
$9.5 million or 4.0%. The securities portfolio represents 21.7% of
earning assets and provides a consistent source of liquidity and
earnings to the Bancorp. Cash and cash equivalents totaled $60.8 million
at March 31, 2019, compared to $17.1 million at December 31, 2018, an
increase of $43.6 million or 254.5%. The increase in cash and cash
equivalents is the result of the acquisition of AJSB.

Funding

At March 31, 2019, core deposits totaled $795.0 million, compared to
$670.9 million at December 31, 2018, an increase of $124.1 million or
18.5%. The increase is the result of the acquisition of AJSB as well as
the Bancorp’s efforts to maintain core deposits. Core deposits include
checking, savings, and money market accounts and represented 72.2% of
the Bancorp’s total deposits at March 31, 2019. During the first three
months of 2019, balances for noninterest bearing checking, savings, and
money market accounts increased. The increase in these core deposits is
a result of management’s sales efforts along with customer preferences
for competitively priced short-term liquid investments. During the first
three months of 2019, balances for interest bearing checking accounts
decreased as part of cyclical outflows associated with municipalities.
At March 31, 2019, balances for certificates of deposit totaled $306.7
million, compared to $258.9 million at December 31, 2018, an increase of
$47.8 million or 18.4%. In addition, at March 31, 2019, borrowings and
repurchase agreements totaled $32.7 million, compared to $54.6 million
at December 31, 2018, a decrease of $21.9 million or 40.2%. The decrease
in short-term borrowings was a result of FHLB advance maturities.

Asset Quality

At March 31, 2019, non-performing loans totaled $8.4 million, compared
to $6.9 million at December 31, 2018, an increase of $1.4 million or
20.9%. The Bancorp’s ratio of non-performing loans to total loans was
0.97% at March 31, 2019, compared to 0.90% at December 31, 2018. The
Bancorp’s ratio of non-performing assets to total assets was 0.94% at
March 31, 2019, compared to 0.97% at December 31, 2018.

For the three months ended March 31, 2019, $317 thousand in provisions
to the ALL were required, compared to $341 thousand for the three months
ended March 31, 2018, a decrease of $24 thousand or 7.0%. For the three
months ended March 31, 2019, charge-offs, net of recoveries, totaled $43
thousand. At March 31, 2019, the allowance for loan losses totaled $8.2
million and is considered adequate by management. The allowance for loan
losses as a percentage of total loans was 0.95% at March 31, 2019,
compared to 1.04% at December 31, 2018. The allowance for loan losses as
a percentage of non-performing loans, or coverage ratio, was 98.5% at
March 31, 2019, compared to 115.1% at December 31, 2018.

Capital Adequacy

At March 31, 2019, shareholders’ equity stood at $123.2 million, and
tangible capital represented 9.7% of total assets. The Bancorp’s
regulatory capital ratios at March 31, 2019 were 12.6% for total capital
to risk-weighted assets, 11.6% for both common equity tier 1 capital to
risk-weighted assets and tier 1 capital to risk-weighted assets, and
8.5% for tier 1 leverage capital to adjusted average assets. Under all
regulatory capital requirements, the Bancorp is considered well
capitalized. The book value of the Bancorp’s stock stood at $35.70 per
share at March 31, 2019.

About NorthWest Indiana Bancorp

NorthWest Indiana Bancorp is a locally managed and independent financial
holding company headquartered in Munster, Indiana, whose activities are
primarily limited to holding the stock of Peoples Bank. Peoples Bank
provides a wide range of personal, business, electronic and wealth
management financial services from its 22 locations in Lake and Porter
Counties in Northwest Indiana and South Suburban Chicagoland. NorthWest
Indiana Bancorp’s common stock is quoted on the OTC Pink Marketplace and
the OTC Bulletin Board under the symbol NWIN. The website
ibankpeoples.com provides information on Peoples Bank’s products and
services, and NorthWest Indiana Bancorp’s investor relations.

Forward Looking Statements

This press release may contain forward-looking statements regarding the
financial performance, business prospects, growth and operating
strategies of NWIN. For these statements, NWIN claims the protections of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Statements in this
communication should be considered in conjunction with the other
information available about NWIN, including the information in the
filings NWIN makes with the SEC. Forward-looking statements provide
current expectations or forecasts of future events and are not
guarantees of future performance. The forward-looking statements are
based on management’s expectations and are subject to a number of risks
and uncertainties. Forward-looking statements are typically identified
by using words such as “anticipate,” “estimate,” “project,” “intend,”
“plan,” “believe,” “will” and similar expressions in connection with any
discussion of future operating or financial performance.

Although management believes that the expectations reflected in such
forward-looking statements are reasonable, actual results may differ
materially from those expressed or implied in such statements. Risks and
uncertainties that could cause actual results to differ materially
include: difficulties and delays in integrating NWIN’s and AJSB’s
businesses or fully realizing cost savings and other benefits; changes
in asset quality and credit risk; the inability to sustain revenue and
earnings growth; changes in interest rates and capital markets;
inflation; customer acceptance of NWIN’s products and services; customer
borrowing, repayment, investment, and deposit practices; customer
disintermediation; the introduction, withdrawal, success, and timing of
business initiatives; competitive conditions; the inability to realize
cost savings or revenues or to implement integration plans and other
consequences associated with mergers, acquisitions, and divestitures;
economic conditions; and the impact, extent, and timing of technological
changes, capital management activities, and other actions of the Federal
Reserve Board and legislative and regulatory actions and reforms.

Disclosure Regarding Non-GAAP Measures

This report refers to certain financial measures that are identified as
non-GAAP. The Bancorp believes that the non-GAAP measures are helpful to
investors to compare normalized, integral operations of the Bancorp
removed from one-time events such as purchase accounting impacts and
cost of acquisition. This supplemental information should not be
considered in isolation or as a substitute for the related GAAP
measures. See the attached Table 1 at the end of this press release for
a reconciliation of the non-GAAP earnings measures identified herein and
their most comparable GAAP measures.

NorthWest Indiana Bancorp

Quarterly Financial Report

Key Ratios

(Unaudited)

Three Months Ended

March 31,

2019

2018

Return on equity

7.59

%

11.20

%

Return on assets

0.72

%

1.10

%

Basic earnings per share

$

0.66

$

0.89

Diluted earnings per share

$

0.66

$

0.89

Yield on loans

5.04

%

4.46

%

Yield on security investments

2.85

%

2.77

%

Total yield on earning assets

4.40

%

3.99

%

Cost of deposits

0.64

%

0.35

%

Cost of repurchase agreements

1.86

%

1.15

%

Cost of borrowed funds

2.41

%

1.87

%

Total cost of funds

0.70

%

0.43

%

Net interest margin - tax equivalent

3.81

%

3.80

%

Noninterest income / average assets

0.84

%

1.05

%

Noninterest expense / average assets

3.34

%

2.98

%

Net noninterest margin / average assets

-2.51

%

-1.93

%

Efficiency ratio

78.14

%

67.75

%

Effective tax rate

13.27

%

13.94

%

Dividend declared per common share

$

0.30

$

0.29

(Unaudited)

March 31,

December 31,

2019

2018

Net worth / total assets

9.72

%

9.26

%

Book value per share

$

35.70

$

33.50

Non-performing assets to total assets

0.94

%

0.97

%

Non-performing loans to total loans

0.97

%

0.90

%

Allowance for loan losses to non-performing loans

98.50

%

115.12

%

Allowance for loan losses to loans outstanding

0.95

%

1.04

%

Foreclosed real estate to total assets

0.12

%

0.15

%

Consolidated Statements of Income

(Unaudited)

(Dollars in thousands)

Three Months Ended

March 31,

2019

2018

Interest income:

Loans

$

10,543

$

6,994

Securities & short-term investments

1,944

1,739

Total interest income

12,487

8,733

Interest expense:

Deposits

1,672

675

Borrowings

215

223

Total interest expense

1,887

898

Net interest income

10,600

7,835

Provision for loan losses

317

341

Net interest income after provision for loan losses

10,283

7,494

Noninterest income:

Fees and service charges

1,162

892

Wealth management operations

500

415

Gain on sale of loans held-for-sale, net

242

211

Gain on sale of securities, net

352

758

Increase in cash value of bank owned life insurance

163

108

Gain on sale of foreclosed real estate, net

27

32

Other

124

33

Total noninterest income

2,570

2,449

Noninterest expense:

Compensation and benefits

4,676

3,860

Occupancy and equipment

1,123

853

Data processing

703

361

Federal deposit insurance premiums

91

84

Marketing

263

134

Other

3,435

1,675

Total noninterest expense

10,291

6,967

Income before income taxes

2,562

2,976

Income tax expenses

340

415

Net income

$

2,222

$

2,561

NorthWest Indiana Bancorp

Quarterly Financial Report

Balance Sheet Data

(Dollars in thousands)

(Unaudited)

March 31,

December 31,

Change

Mix

2019

2018

%

%

Total assets

$

1,268,353

$

1,096,158

15.7

%

n/a

Cash & cash equivalents

60,764

17,139

254.5

%

n/a

Certificates of deposit in other financial institutions

2,215

2,024

9.4

%

n/a

Securities - available for sale

251,331

241,768

4.0

%

n/a

Loans receivable:

Residential real estate

$

302,918

$

223,323

35.6

%

35.0

%

Home equity

49,716

45,483

9.3

%

5.8

%

Commercial real estate

265,013

253,104

4.7

%

30.6

%

Construction and land development

66,920

64,433

3.9

%

7.7

%

Multifamily

49,316

47,234

4.4

%

5.7

%

Farmland

236

240

-1.7

%

0.0

%

Consumer

7,778

6,043

28.7

%

0.9

%

Commercial business

103,507

103,439

0.1

%

12.0

%

Government

19,591

21,101

-7.2

%

2.3

%

Total loans

$

864,995

$

764,400

13.2

%

100.0

%

Deposits:

Core deposits:

Noninterest bearing checking

$

177,317

$

127,277

39.3

%

16.1

%

Interest bearing checking

210,365

214,400

-1.9

%

19.1

%

Savings

218,760

160,490

36.3

%

19.9

%

Money market

188,559

168,727

11.8

%

17.1

%

Total core deposits

795,001

670,894

18.5

%

72.2

%

Certificates of deposit

306,652

258,892

18.4

%

27.8

%

Total deposits

$

1,101,653

$

929,786

18.5

%

100.0

%

Borrowings and repurchase agreements

$

32,691

$

54,628

-40.2

%

Stockholder's equity

123,247

101,464

21.5

%

Asset Quality

(Unaudited)

(Dollars in thousands)

March 31,

December 31,

Change

2019

2018

%

Nonaccruing loans

$

7,212

$

6,595

9.4

%

Accruing loans delinquent more than 90 days

1,149

321

257.9

%

Securities in non-accrual

2,079

2,050

1.4

%

Foreclosed real estate

1,494

1,627

-8.2

%

Total nonperforming assets

$

11,934

$

10,593

12.7

%

Allowance for loan losses (ALL):

ALL specific allowances for impaired loans

$

265

$

246

7.7

%

ALL general allowances for loan portfolio

7,971

7,716

3.3

%

Total ALL

$

8,236

$

7,962

3.4

%

Troubled Debt Restructurings:

Nonaccruing troubled debt restructurings, non-compliant (1) (2)

$

-

$

-

0.0

%

Nonaccruing troubled debt restructurings, compliant (2)

123

125

-1.6

%

Accruing troubled debt restructurings

1,900

1,906

-0.3

%

Total troubled debt restructurings

$

2,023

$

2,031

-0.4

%

(1) "non-compliant" refers to not being within the guidelines of the
restructuring agreement